John Ballard, The Motley Fool
5 min read
In This Article:
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CoreWeave is a pure-play investment in the growing demand for AI data centers.
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Advanced Micro Devices continues to see strong demand for its data center chips.
Artificial intelligence (AI) is sweeping across the corporate landscape, increasing labor productivity and the speed of innovation. This technology is projected to have a $20 trillion impact on the global economy by 2030, according to IDC. Here are two AI stocks to profit off this opportunity.
There are billions of dollars pouring into data centers to prepare for an AI-driven economy. But many of the world's data centers are equipped with legacy equipment and not up-to-date for the demands of AI workloads. This is a huge opportunity for CoreWeave (NASDAQ: CRWV), one of the leading operators of purpose-built data centers for AI.
CoreWeave just completed its initial public offering this year, but its first earnings report as a public company reveals incredible demand for its cloud computing services. Revenue is soaring, increasing from $189 million in the first quarter of 2024 to $982 million in the 2025 first quarter.
Moreover, it had a massive and growing revenue backlog worth $25.9 billion in the first quarter, an increase of 63% over the year-ago quarter. Much of this year-over-year increase was driven by a recent $11.9 billion deal with ChatGPT maker OpenAI.
The growing revenue backlog indicates significant long-term financial commitments for the company's services. It generates revenue either on a contractual basis or on demand, but most of its revenue comes from contracts, which can extend over several years. Investors are usually willing to pay high price-to-sales multiples for companies that have a high visibility to future revenue like CoreWeave.
One risk investors will want to watch is whether it can secure enough power over time to run its data centers and meet growing demand. Large data centers need a significant amount of electricity, and that could create challenges with growing demand for AI.
CoreWeave appears to be in good shape on this front. It says it has 420 megawatts of power supporting 33 AI-optimized data centers across the U.S. and Europe. It has also contracted to receive additional power, providing it with up to 1.6 gigawatts over a multiyear period.
The stock's market cap sits at $53 billion at the time of this writing. Based on the company's 2025 revenue outlook, this represents a forward price-to-sales ratio of 11, which seems fair for a fast-growing infrastructure-as-a-service provider. As the company continues to report strong growth, this valuation can support new highs for the stock in 2025 and beyond.
